Higher Q4 sales don't lift China's SMIC out of the red

Higher Q4 sales don't lift China's SMIC out of the red

China's SMIC reported a wider Q4 loss, despite increased sales during the period.

Semiconductor Manufacturing International Corp. (SMIC), China's largest chipmaker, has reported a net loss of $US14.8 million for the fourth quarter of 2005, despite recording a 14 per cent increase in revenue during the period.

SMIC's fourth quarter revenue was $US333.1 million, up from $US291.8 million in revenue during the same period last year. However, the contract chip maker's net loss widened by 33.5 per cent compared to the same period last year, when it reported a loss of $US11.2 million.

Company executives largely blamed the fourth-quarter loss on production of DRAM chips, which accounted for 31.3 per cent of revenue during the fourth quarter. DRAM chips are less profitable to manufacture than other types of memory or logic chips, such as processors, which can command a premium.

Offering a better mix of products will help SMIC return to profitability and the company is moving in this direction by working to phase out production of some DRAM chips.

"We can reach the break-even point with a utilisation rate as low as 80 per cent if we have the right product mixture," the company's president and chief executive officer, Richard Chang, said.

SMIC, which is based in Shanghai, reported a utilisation rate of 93 per cent during the fourth quarter, compared to 95 per cent one year ago.

Looking ahead, SMIC said it expected to see wafer shipments rise from 2 per cent to 4 per cent during the first quarter, with the company's utilisation rate between 92 per cent to 94 per cent.

For the full year, SMIC expected to spend $US1.1 billion on capital expenditures, and said this figure would be adjusted based on market conditions.

SMIC has not reported a profit since the third quarter of 2004. However, the company expected to break into the black this year, Chang said. "The whole year [of 2006] will be profitable," he said.

Chang predicted SMIC would probably return to profitability during the third quarter of 2006, and said the company would work hard to achieve this goal earlier.

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